Balancing Point

BarroMetrics Views: Balancing Point

It appears to me that US stocks are a balancing point. Quite a few of the commentators I like are flashing amber warnings (e.g. see attached PDF from Zero Hedge). Gann Global has a time window for a possible turning point from now until April 4.

I take a slightly different view. I do not see the public participation that I’d normally associate with a ‘bubble’ market. I have assessed the move since Trump’s election (Nov 7, 2016) as the start of the ‘bubble’. For a top to come in, I’d prefer to see a parabolic rise into end March/early April.

Figure 1 shows the S&P off the 2016 lows. I wanted to compare the Nov 2016 range and volume with the Trump move. The purple line is the drawn off the one std high of the H-L of an 18-day volume average.

Extend the horizontal line to the left off Feb 2016, we see volume easily matching the 2016-02 levels; extend it to the right, and the range and volume levels drop off – not the volume and range I’d normally associate with a healthy bull market. But, it is the volume and range I’d associate with the bull driven by QE. The difference between the current ‘Trump-hope’ drive and the QE drive is currently we are seeing much greater public participation, the participation that makes for a top.

Figure 2 shows a clearer picture of the current price action – looks like we are poised to move one way or another. A move down from here on the same volume and range would probably be a buying opportunity; a move down sustained sharply increased volume and range would be a warning that a top is in.